Last updated: April 5, 2013 7:17 pm

BP fails to block ‘absurd’ spill payments

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Gulf Voices speak about oil spill damage during visit to Capitol Hill in Washington©Reuters

BP has failed in its attempt to win a court order blocking what the UK oil and gas group describes as “absurd” compensation payments on “fictitious” claims for business losses following the 2010 Deepwater Horizon disaster.

At the court in New Orleans where the case over the spill is being heard, Judge Carl Barbier reiterated a decision he has made twice already this year, rejecting BP’s arguments over the methods used to calculate compensation payments.

BP claims figures

BP claims figures
Payments offered in total by by type

BP has warned that a decision against it could cost it billions of dollars.

On Friday afternoon it filed appeals against Judge Barbier’s decision, building on its appeal earlier this week against his previous rulings. It could try to bring its case to the Fifth Circuit appeals court, also in New Orleans, as soon as next week.

BP and lawyers representing businesses and individuals who say they lost money as a result of the 2010 spill have been in dispute over the interpretation of the settlement the two sides agreed last year.

Shortly before the trial was scheduled to start, they agreed a deal, later ratified by the court, to pay compensation for economic losses and health effects for people in the states affected by the spill: Louisiana, Alabama, Mississippi, Florida and Texas.

Earlier this year, BP revealed that it was concerned about the way that Patrick Juneau, the Louisiana lawyer appointed as an independent administrator of claims under the settlement, was deciding on payments.

In particular, it has argued that claims for business economic losses have been paid without sufficient proof that the alleged damage was a result of the spill. The businesses receiving payments include construction companies, farms and law firms, sometimes hundreds of miles from the Gulf of Mexico coast.

Mr Juneau has been accepting claims using calculations of losses based on cash receipts and payments, which BP believes offers businesses with lumpy cash flows the opportunity to present losses that are larger than any damage they can show they actually suffered.

However, the plaintiffs’ lawyers have argued that using cash payments is the only objective way to calculate losses, and on Friday Judge Barbier again upheld that view.

BP said in a statement that it continued to believe Mr Juneau’s interpretation of the settlement was “contrary to the agreement” and had “produced unjustified windfall payments to numerous business claimants for non-existent, artificially calculated losses”.

It added: “BP believes that such a result is completely at odds with the parties’ stated intent in reaching a settlement last year.”

When the agreement was reached BP estimated that it would cost it about $7.8bn, but now expects it to be substantially more than that.

Last month the company said it expected the cost to be “significantly higher” than $7.7bn, even if it could persuade the courts to accept its interpretation of the settlement agreement. If it failed in that attempt, the cost would be higher again, it said.

Friday’s ruling from Judge Barbier means that Mr Juneau’s definition of losses covered by the settlement will remain in effect, and he will carry on paying out for business losses on that basis.

BP estimated last month that “fictitious” claims had already cost hundreds of millions of dollars, and would run into the billions unless stopped by the court.

Most of the business loss claims submitted to Mr Juneau have not yet been decided on, and new claims have been coming in at a rate of about 1,000 a week.

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